exhibit10_1.htm


    EXHIBIT
10.1


    EMPLOYMENT
AGREEMENT

     

    This
Employment Agreement (“Agreement”) is made on June 24, 2008 by and between
Analysts International Corporation (the “Company”) with headquarters at 3601 W.
76th Street, Minneapolis, Minnesota 55435 and Michael W. Souders
(“Executive”).

     

    RECITALS

     

    WHEREAS,
the Company desires to retain Executive as an Employee of the Company, and
Executive desires to be so employed.

     

    NOW,
THEREFORE, in consideration of the mutual promises and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and Executive hereby
agree as follows:

     

    In
consideration for the mutual promises contained herein, the parties, intending
to be legally bound, agree as follows:

     

    AGREEMENT

     

    
      	
              1.  

            	
              Terms of
      Employment

            


    

     

    
      	
              1.1  

            	
              Commencement
      Date.  This Agreement shall become effective on July 1,
      2008 (the “Commencement Date”).

            


    

     

    
      	
              1.2  

            	
              Position.  The
      Company will employ Executive in the capacity of Senior Vice President,
      Solutions, reporting to the Company’s
CEO.

            


    

     

    
      	
              1.3  

            	
              Best
      Efforts.  During Executive’s employment by the Company,
      Executive agrees to devote his full time and best efforts to the interests
      of the Company and to refrain from engaging in other employment or in any
      activities that may be in conflict with the best interests of the
      Company.  Executive agrees to perform his duties to a level
      consistent with the highest standards of one holding such position in
      similar businesses or enterprises.  Executive agrees not to
      render services to anyone other than the Company (or its parent or
      subsidiaries) for compensation as an employee, consultant or otherwise
      during the term of this Agreement.

            


    

     

    
      	
              1.4  

            	
              Personal
      Activities.  The provisions of Sections 1.2 and 1.3 of
      this Agreement will not be deemed to prohibit Executive from devoting
      reasonable time to personal
matters.

            


    

     

    
      	
              2.  

            	
              Term of
      Employment.

            


    

     

    
      	
              2.1  

            	
              Duration.  Subject
      to the provisions for termination set forth in Sections 6, 7 and 8 below,
      the Original Term of this Agreement (“Original Term”) will commence upon
      the 1st day of July, 2008 and will continue to and include the 31st day of
      December, 2010.

            


    

     

    
      
      

      
        

      

    

    
      
      

    

    
      
      

    

    
      	
              2.2  

            	
              Extension of
      Provisions.  At the end of the Original Term, the
      provisions of the Agreement will automatically renew for an additional one
      (1) year term (“Additional Term”) commencing January 1, 2011, unless
      either party gives notice of nonrenewal at least ninety (90) days before
      the scheduled expiration of the term.  At the end of any
      Additional Term, the provisions of the Agreement will automatically renew
      for an Additional Term, unless either party gives notice of nonrenewable
      at least ninety (90) days before the scheduled expiration of the
      term.

            


    

     

    
      	
              3.  

            	
              Compensation and
      Benefits.

            


    

     

    
      	
              3.1  

            	
              Salary.  For
      all services rendered by Executive pursuant to this Agreement, the Company
      will pay Executive an annual base salary (“Base Compensation”) equal to
      Three Hundred Thousand Dollars ($300,000).  Payment will occur
      at regular payroll intervals in accordance with the Company’s standard
      payroll practices.  The Company’s CEO and compensation committee
      of the Board or the Board itself will review the Executive’s compensation
      annually and, in its sole discretion, may determine to increase such base
      salary for the following year but cannot decrease the annual salary below
      $300,000.

            


    

     

    
      	
              3.2  

            	
              Incentive
      Compensation.  In addition to Executive’s Base
      Compensation, Executive will be eligible to earn additional cash incentive
      compensation in a target range of between 0% and 70% of Base Compensation
      in each year of employment during the Original Term or any Additional Term
      (“Incentive Compensation”).  Executive’s potential Incentive
      Compensation for fiscal year 2008 will be determined in accordance with
      the 2008 Annual Management Incentive Plan attached as Exhibit
      A.  For purposes of the 2008 Annual Management Incentive Plan,
      Executive is a leader of an SBU and is eligible to participate in the
      Plan.  Executive understands that Exhibit A will be replaced,
      amended or eliminated for fiscal years after
  2008.

            


    

     

    
      	
              3.3  

            	
              Long-Term Incentive
      Compensation.  In addition, Executive shall be eligible
      to be awarded stock options or restricted shares from the Company’s stock
      option and equity incentive plans at the sole discretion of the
      compensation committee.

            


    

     

    
      	
              3.4  

            	
              Stock
      Options.  On or about June 27, 2008, Executive will be
      granted options to purchase 125,000 shares of the Company’s common stock
      with one-quarter being vested immediately (31,250 options) and the
      remainder vesting on the anniversary date hereof in even increments over
      three years from the date of the
grant.

            


    

     

    Such
options shall be incentive stock options to the extent that such options qualify
as incentive stock options as defined in Internal Revenue Code Section
422.  The Company may issue such options from the plans as it deems
appropriate but to the extent possible shall issue the options as incentive
stock options.  The stock option agreement shall provide that in the
event of a Change of Control on or after the effective date of this Agreement,
any options remaining unvested at the time of the Change of Control shall vest
immediately.  

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    For
purposes of this Section 3.4, “Change of Control” shall have the same meaning as
set forth in Exhibit B.  Executive shall sign an option agreement or
agreements containing the terms for the options outlined herein and such other
terms and conditions required of similarly situated executives by the Company as
determined by the Board or the compensation committee of the
Board.  The form of such agreement is attached hereto as Exhibits C-1
and C-2 and incorporated herein by reference.

     

    
      	
              3.5  

            	
              Deferred Compensation
      Plan.  Executive will be entitled to participate in the
      Company’s deferred compensation plan (known as the “Restated Special
      Executive Retirement Plan” or “Restated SERP”) at a participation rate of
      fifteen percent (15%) of Base
Compensation.

            


    

     

    
      	
              4.  

            	
              Fringe
      Benefits.

            


    

     

    Executive
will be entitled to participate in the Company’s standard benefit programs, on
the same terms as other senior executives of the
Company.  Notwithstanding the foregoing, the Company will also provide
Executive the following:

     

    
      	
              4.1  

            	
              Paid Time
      Off.  Executive shall be entitled to paid time off at his
      discretion and as business conditions warrant.  If necessary due
      to business conditions of the Company, Executive agrees to obtain
      concurrence from the CEO prior to taking the paid time
  off.

            


    

     

    
      	
              4.2  

            	
              Business
      Expenses.  Executive will be entitled to reimbursement of
      all reasonable, business-related travel and other expenses incurred by
      Executive in the ordinary course of business on behalf of the Company, so
      long as such expenses are incurred, documented and authorized pursuant to
      the Company’s expense reimbursement
policies.

            


    

     

    
      	
              4.3  

            	
              No Car
      Allowance.  For the avoidance of doubt, Executive
      acknowledges that from and after the Commencement Date, he will no longer
      receive, nor be entitled to receive, any car allowance or other
      compensation related to the operation of any personal motor
      vehicle.

            


    

     

    
      	
              5.  

            	
              Location.

            


    

     

    Executive
will provide his services in the Auburn Hills (Detroit), Michigan
area.  Notwithstanding the foregoing, the parties recognize and
acknowledge that Executive may be required to spend considerable business time
in locations other than the Auburn Hills (Detroit), Michigan area.

     

    
      	
              6.  

            	
              Termination of
      Employment by the Company.

            


    

     

    
      	
              6.1  

            	
              For
      Cause.  For purposes of this Agreement, the Company will
      have the right to terminate Executive’s employment for
      Cause.  For purposes of this Agreement, “Cause” shall
      mean:

            


    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    
      	
              6.1.1  

            	
              Executive’s
      substantial failure or neglect, or refusal to perform, the duties and
      responsibilities of Executive’s position and/or the reasonable direction
      of the CEO;

            


    

     

    
      	
              6.1.2  

            	
              The
      commission by Executive of any willful, intentional or wrongful act that
      has the effect of materially injuring the reputation, business or
      performance of the Company;

            


    

     

    
      	
              6.1.3  

            	
              Executive’s
      conviction of, or Executive’s guilty or nolo contendere plea with respect
      to, any crime punishable as a
felony;

            


    

     

    
      	
              6.1.4  

            	
              Executive’s
      conviction of, or Executive’s guilty or nolo contendere plea with respect
      to, any crime involving moral turpitude;
or

            


    

     

    
      	
              6.1.5  

            	
              Any
      bar against Executive from serving as a director, officer or executive of
      any firm the securities of which are publicly
  traded.

            


    

     

    For
purposes of this Section 6.1, an act or failure to act by Executive shall not be
“willful” unless it is done, or omitted to be done, in bad faith and without any
reasonable belief that Executive’s action or omission was in the best interests
of the Company.

     

    
      	
              6.2  

            	
              Inability to
      Perform.  For purposes of this Agreement, the Company
      will have the right to terminate Executive’s employment upon the
      occurrence of any of the following events (“Inability to
      Perform”):

            


    

     

    
      	
              6.2.1  

            	
              Executive
      becomes unable to perform the essential functions of Executive’s position
      for a period of at least ninety (90) days to the extent that, in the
      reasonable determination of the CEO, he is no longer able to report to
      work and to carry on his duties on behalf of the Company;
    or

            


    

     

    
      	
              6.2.2  

            	
              Executive
      dies.

            


    

     

    
      	
              6.2.3  

            	
              Notwithstanding
      anything to the contrary in this Section 6.2, if the Company’s CEO and
      compensation committee of the Board determine, in their sole discretion
      and in accordance with the performance objectives set forth in the 2008
      Annual Management Incentive Plan attached as Exhibit A, that Executive
      should be paid Incentive Compensation for the portion of the fiscal year
      prior to such termination, Executive shall be paid such amount within
      thirty (30) days after the Company’s CEO and compensation committee of the
      Board make such determination.  For the avoidance of doubt, in
      the event of an Inability to Perform, Executive understands that he shall
      have no right to any such Incentive Compensation, and whether or not he
      receives Incentive Compensation is a matter of discretion for the
      Company’s CEO and compensation committee of the Board to
      determine.

            


    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
      	
              6.3  

            	
              Notice.  In
      the event that the CEO determines that Cause for termination exists, the
      CEO shall deliver to Executive written notice that an event of Cause has
      occurred after which Executive shall have fifteen (15) days to cure such
      event of Cause to the reasonable satisfaction of the
  CEO.

            


    

     

    
      	
              6.4  

            	
              Termination for
      Cause/Inability to Perform.  The Company may terminate
      Executive’s employment at any time for Cause as defined within this
      Agreement after giving Executive the notice and Executive’s failure to
      cure pursuant to Section 6.3 above and in any such case will have no
      further obligation or liability to Executive.  Likewise, if the
      Company terminates Executive for Inability to Perform, the Company will
      have no further obligation or liability to Executive except (and only) as
      stated in Section 6.2.3 above and except for offering continuation of
      benefits as required by the Consolidated Omnibus Budget Reconciliation Act
      (“COBRA”) and the regulations promulgated
  thereunder.

            


    

     

    
      	
              6.5  

            	
              Termination Without
      Cause.  Executive’s employment during the Original Term
      or any Additional Term may be terminated by the Company without Cause upon
      thirty (30) days’ notice.  If the Company terminates Executive’s
      employment without Cause during the Original Term or during any Additional
      Term, Executive will continue to receive Base Compensation for a period of
      twelve (12) months, provided that Executive signs all appropriate
      paperwork, including a full release of all claims to the Company, in a
      form acceptable to the Company.  The Company will also reimburse
      Executive for medical insurance premium payments made under COBRA, for a
      period of up to six (6) months following the date of termination, provided
      that the Company receives sufficient evidence of proof of such payments
      during the COBRA period.  For purposes of this Section 6.5,
      termination of Executive’s employment due to nonrenewal of Executive’s
      employment agreement at the end of the Original Term or any Additional
      Term, shall be deemed a termination without Cause and entitle Executive to
      the payments and benefits set forth in this Section
  6.5.

            


    

     

    
      	
              7.  

            	
              Termination of
      Employment by Executive.

            


    

     

    
      	
              7.1  

            	
              Resignation for Good
      Reason.  If Executive believes Good Reason to resign
      exists, before resigning, he must first give the Company written notice of
      the alleged Good Reason and an opportunity to cure within fifteen (15)
      days of notice if feasible.  If Executive resigns from his
      employment for Good Reason, he will continue to receive Base Compensation
      for a period of twelve (12) months, provided that Executive signs all
      appropriate paperwork, including a full release of all claims to the
      Company, in a form reasonably acceptable to the Company.  The
      Company will also reimburse Executive for all medical insurance premium
      payments, made under COBRA, for a period of up to six (6) months following
      the date of resignation for Good Reason, provided that the Company
      receives sufficient evidence of proof of such payments during the COBRA
      period.

            


    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    For
purposes of this Section 7.1 (and not for the purpose of determining
compensation and benefits payable under Exhibit A, the Change in Control
Agreement), “Good Reason” will mean a good faith determination by Executive,
communicated in writing to the CEO, that any one or more of the following events
has occurred:

     

    
      	
              7.1.1  

            	
              a
      reduction in Executive’s Base Salary below
  $300,000;

            


    

     

    
      	
              7.1.2  

            	
              a
      requirement imposed on Executive that results in Executive being based at
      a location that is outside of a fifty (50) mile radius of Executive’s job
      location immediately prior to the change in
  location;

            


    

     

    
      	
              7.1.3  

            	
              any
      material breach or unilateral and material change in assignment or job
      title, but not including a change in Executive’s reporting structure in
      the event of a Change in Control.

            


    

     

    
      	
              7.2  

            	
              Notice.  If
      Executive terminates his employment for Good Reason, he must provide
      thirty (30) days’ prior written notice to the
  Company.

            


    

     

    
      	
              7.3  

            	
              Resignation without
      Good Reason.  If Executive resigns from his employment
      without Good Reason [or elects not to renew the Agreement upon its
      expiration], the Company will have no further obligation or liability to
      Executive.

            


    

     

    
      	
              8.  

            	
              Change of Control
      Obligations; Deferred Compensation
  Payments.

            


    

     

    
      	
              8.1  

            	
              Change of Control
      Obligations.  In the event of a change in control in the
      ownership of the Company, the Company’s and Executive’s obligations, and
      Executive’s benefits, shall be governed by the Change of Control Agreement
      attached hereto as Exhibit A.  Notwithstanding the foregoing, in
      the event of a change in control (as the term “Change of Control” is
      defined in Exhibit A), Executive shall have the additional right at the
      six (6) month anniversary date after the Change of Control to resign and
      receive the payments outlined in Section 7.1 above, provided that
      Executive signs all appropriate paperwork, including providing a full a
      release of all claims to the Company in a form acceptable to the
      Company.  To exercise this right to resign and receive
      severance, Executive must give written notice of intent to resign no
      sooner than four (4) months after a Change of Control, and no later than
      five (5) months after a Change of
Control.

            


    

     

    
      	
              8.2  

            	
              Deferred Compensation
      Payments.  Deferred compensation covered by the Company’s
      deferred compensation plan (Restated SERP) will be treated and distributed
      in accordance with terms and conditions of the Restated
    SERP.

            


    

     

    
      	
              8.3  

            	
              Limitation on Change
      of Control Severance Payments.  For the avoidance of
      doubt, Executive acknowledges and agrees that the total amount of
      severance payments payable to Executive upon any Change of Control for
      lost Base Compensation shall not exceed 100% of his annual Base
      Compensation at the time of the Change of
  Control.

            


    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    
      	
              9.  

            	
              Delay of
      Payment.

            


    

     

    Notwithstanding
anything to the contrary, to the extent that Executive is a “key employee”
pursuant to the provisions of Section 409A of the Internal Revenue Code as of
the date that any severance benefits or other deferred compensation becomes
payable to the Executive hereunder, and such severance benefits are required to
be delayed until the date six months following Executive’s termination of
employment in order to avoid additional tax under Section 409A of the Code,
payment and provision of such severance benefits or other deferred compensation
shall be delayed until the date six months after Executive’s termination of
employment.

     

    
      	
              10.  

            	
              Intellectual Property
      Rights.

            


    

     

    
      	
              10.1  

            	
              Non-Infringement.  Executive
      agrees that all original work products created or produced by Executive
      during the course of his employment with the Company will be Executive’s
      work and will not infringe upon or violate any patent, copyright, trade
      secret, contractual or other proprietary right of any third
      party.

            


    

     

    
      	
              10.2  

            	
              Disclosure.  Executive
      agrees to disclose and describe to the Company, on a timely basis, all
      works of authorship, inventions and all other intellectual property that
      Executive may solely or jointly discover, conceive, create, develop,
      produce or reduce to practice while employed by the Company (“Company
      Inventions”).

            


    

     

    
      	
              10.3  

            	
              Assignment.  Executive
      hereby assigns and agrees to assign to the Company, or its designee,
      Executive’s entire right, title, and interest in and to all Company
      Inventions.  Executive represents that the Company’s rights in
      all such Company Inventions will be free and clear of any encumbrances,
      liens, claims, judgments, causes of action or other legal rights or
      impediments.

            


    

     

    
      	
              10.4  

            	
              Independent
      Development.  NOTICE: The Company is a Minnesota
      corporation headquartered in Minneapolis, Minnesota.  Pursuant
      to Minnesota Statutes § 181.78, Executive is hereby notified that the
      foregoing agreement does not apply to an invention for which no equipment,
      supplies, facility or trade secret information of the Company was used and
      which was developed entirely on the employee’s own time, and (1) which
      does not relate (a) directly to the business of the Company (or its
      Clients) or (b) to the Company’s (or its Clients’) actual or demonstrably
      anticipated research or development, or (2) which does not result from any
      work performed by the employee for the Company or its
      Clients.  For purposes of this Section 10.4, the term “Client”
      shall have the same meaning as set forth in Section 14.2 of this
      Agreement.

            


    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    
      	
              10.5  

            	
              Works for
      Hire.  Executive acknowledges and agrees that all
      original works of authorship which are made by Executive (solely or
      jointly with others) within the scope of his employment and which are
      protectable by copyrights, are “works made for hire” as that term is
      defined in the United States Copyright Act (17 U.S.C. § 101) and that, as
      such, all rights comprising copyright under the United States Copyright
      laws will vest solely and exclusively in his employer, the
      Company.  Executive hereby irrevocably and unconditionally
      waives all so-called moral rights that may vest in Executive (whether
      before, on or after the date hereof) in connection with Executive’s
      authorship of any copyright works in the course of his employment with the
      Company, wherever in the world enforceable, including without limitation
      the right to be identified as the author of any such works and the right
      of integrity (i.e., not to have any
      such works subjected to derogatory treatment), and Executive agrees never
      to assert any such moral rights with respect to any Company
      Invention.

            


    

     

    
      	
              10.6  

            	
              Enforcement;
      Cooperation.  Executive agrees to perform, during and
      after his employment, all acts deemed necessary or desirable by the
      Company to permit and assist it, at its sole expense, in obtaining and
      enforcing the full benefits, enjoyment, rights and title throughout the
      world in the Company Inventions hereby assigned to the
      Company.  Such acts may include, but are not limited to,
      execution of documents and assistance or cooperation in the registration
      and enforcement of applicable patents, copyrights, maskworks or other
      legal proceedings.

            


    

     

    
      	
              10.7  

            	
              Attorney in
      Fact.  In the event that the Company is unable for any
      reason, whether during or after Executive’s employment by the Company, to
      secure Executive’s signature to any document required to apply for or
      execute any patent, design rights, registered designs, trademarks,
      copyright, maskwork or other applications with respect to any Company
      Inventions (including improvements, renewals, extensions, continuations,
      divisions or continuations in part thereof), Executive hereby irrevocably
      designates and appoints the Company and its duly authorized officers and
      agents as Executive’s agents and attorneys-in-fact to act for and on his
      behalf and instead of Executive, to execute and file any such application
      and to do all other lawfully permitted acts to further the prosecution and
      issuance of patents, copyrights, maskworks or other rights thereon with
      the same legal force and effect as if executed by
    Executive.

            


    

     

    
      	
              11.  

            	
              Confidentiality.

            


    

     

    
      	
              11.1  

            	
              Confidential Nature of
      Relationship.  Executive acknowledges that his employment
      by the Company creates a relationship of confidence and trust with respect
      to Confidential Information (as hereinafter defined).  During
      the course of his employment with the Company, the Company agrees to
      provide Executive with access to Confidential
      Information.  Executive expressly undertakes to retain in strict
      confidence all Confidential Information transmitted or disclosed to
      Executive by the Company or the Company’s clients, and will never make any
      use of such information except as (and then, only to the extent) required
      to perform Executive’s employment duties for the
      Company.  Executive will take such protective measures as may be
      reasonably necessary to preserve the secrecy and interest of the Company
      in the Confidential Information.  If Executive becomes aware of
      any unauthorized use or disclosure of Confidential Information by any
      person or entity, Executive will promptly and fully advise the Company of
      all facts known to Executive concerning such unauthorized use or
      disclosure.

            


    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    
      	
              11.2  

            	
              Definition.  “Confidential
      Information” means all commercially sensitive information and data of a
      confidential nature, in their broadest context, originated by, on behalf
      of or within the knowledge or possession of the Company or its clients
      (including any subsidiary, division or legal affiliate
      thereof).  Without in any way limiting the foregoing,
      Confidential Information includes, but is not limited to: information that
      has been designated as proprietary and/or confidential; information
      constituting trade secrets; information of a confidential nature that, by
      the nature of the circumstances surrounding the disclosure, should in good
      faith be treated as proprietary and/or confidential; and information and
      data conceived, discovered or developed in whole or in part by Executive
      while employed by the Company. Confidential Information also includes
      information of a confidential nature relating to the Company’s clients,
      prospective clients, strategic business relationships, business
      opportunities, products, services, suppliers, personnel, pricing,
      recruiting strategies, job candidate information, employee information,
      sales strategies, technology, methods, processes, research, development,
      systems, techniques, finances, accounting, purchasing and business
      plans.

            


    

     

    
      	
              11.3  

            	
              Exclusions.  Confidential
      Information does not include information which: (A) is generic; (B) is or
      becomes part of the public domain through no act or omission of Executive;
      (C) was in Executive’s lawful possession prior to the disclosure and was
      not obtained by Executive in breach, either directly or indirectly, of any
      obligation to the Company or any client of the Company’s; (D) is lawfully
      disclosed to Executive by a third party without restriction on disclosure;
      or (E) is independently developed by Executive using his own resources,
      entirely on his own time, and without the use of any Confidential
      Information.

            


    

     

    
      	
              11.4  

            	
              Protected Health
      Information.  If during the course of his employment with
      the Company, Executive receives any “protected health information,” as
      that term is defined in 45 CFR, Part 164, Subpart E (“Privacy of
      Individually Identifiable Health Information”): (A) Executive agrees to
      maintain all such information in strict confidence with the Health
      Insurance Portability and Accountability Act of 1996 (HIPAA); (B)
      Executive agrees that he will make no use whatsoever of any such
      information except as required to perform Executive’s employment duties;
      and (C) Executive agrees that he will never record, store, file or
      otherwise maintain, in any computer or other storage device owned by the
      Company or by Executive, any “protected health information.” Executive
      agrees to alert the Company promptly if he becomes aware of any misuse or
      unauthorized disclosure of any such
information.

            


    

     

    
      	
              11.5  

            	
              Additional
      Confidentiality Agreements.  Executive agrees to execute
      such additional non-disclosure and confidentiality agreements as the
      Company or its clients may from time to time
  request.

            


    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    
      	
              12.  

            	
              Use of Confidential or
      Material Non-Public Information: Codes of
  Conduct.

            


    

     

    
      	
              12.1  

            	
              Confidential or
      Material, Non-Public Information.  Executive acknowledges
      that he is prohibited from using or sharing any Confidential Information
      for personal gain or advantage (in securities transactions or otherwise),
      or for the personal gain or advantage of anyone with whom Executive
      improperly shares such information.  Specifically as to
      material, non-public information of the Company, Executive agrees to
      comply with the Company’s insider trading policy in effect at the
      commencement of employment and as amended from time to
    time.

            


    

     

    
      	
              12.2  

            	
              Codes of
      Conduct.  Executive agrees to carefully review, sign and
      fully comply with any Code of Conduct (or similar policy) of the Company
      either having general applicability to its employees or specifically to
      Executive.

            


    

     

    
      	
              13.  

            	
              Restrictions against
      Solicitation:
Non-Interference.

            


    

     

    During
his employment by the Company and for a period of twelve (12) months after
termination of such employment for any reason, Executive agrees that he will not
engage in the following conduct.

     

    
      	
              13.1  

            	
              Restrictions against
      Solicitation.  Executive will not, directly or
      indirectly, hire or initiate any solicitation or recruitment effort for
      the purpose of attempting to hire any employee of the Company or to induce
      any employee of the Company to leave his employment with the
      Company.

            


    

     

    With
respect to job candidates with or about whom Executive, while employed by the
Company, had actual contact or knowledge, Executive will not, directly or
indirectly, initiate any solicitation or recruitment effort for the purpose of
attempting to hire any such candidate for or on behalf of his new employer or
any company in which Executive owns, directly or indirectly, an
interest.

     

    
      	
              13.2  

            	
              Non-Interference.  Executive
      will not, directly or indirectly, disrupt, damage, impair, impede or
      interfere with the contractual relationship between the Company and any of
      its clients.

            


    

     

    
      	
              14.  

            	
              Restrictions Against
      Competition.

            


    

     

    
      	
              14.1  

            	
              Restricted
      Period.  During his employment by the Company and for a
      period of twelve (12) months after termination of such employment for any
      reason, Executive agrees not to engage in any Competitive Acts with any
      client or prospective client of the Company within the prior 24 months
      prior to termination of Executive’s
employment.

            


    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    
      	
              14.2  

            	
              Definitions.  For
      purposes of this Section 14, the following terms shall be defined as
      follows.

            


    

     

     

    “Competitive
Acts” means soliciting, selling, marketing, brokering, providing or managing any
consulting services within the United States that compete with the Company or
are similar in kind or nature to the services provided or offered by the Company
(“Services”), whether as an employee of a Client or as an employee,
subcontractor, partner or owner of a Competitor.

     

     

    “Client”
means: (A) any Company client about whom Executive possessed or knew
Confidential Information at any time during the two years prior to Executive’s
termination of employment with the Company; or (B) any Company client or
prospective client to whom Executive solicited, proposed, marketed or sold
Services at any time during the previous two years of Executive’s employment
with the Company; (C) any third party having a written partnership, alliance or
teaming agreement or similar strategic business relationship with the Company,
for whom Executive provided Services at any time during the previous two years
of Executive’s employment with the Company.

     

    “Competitor”
means any third party offering technical consulting services within the United
States that competes with the Company or is similar in kind or nature to the
Services provided by the Company.

     

    
      	
              15.  

            	
              Reasonableness of
      Restrictions: Representations of Executive; Extension of Restrictions;
      Enforcement.

            


    

     

    
      	
              15.1  

            	
              Reasonableness of
      Restrictions.  Executive acknowledges that the
      restrictions set forth in this Agreement are reasonable in terms of both
      the Company’s need to protect its legitimate business interests and
      Executive’s ability to pursue alternative employment opportunities in the
      event his employment with the Company
  terminates.

            


    

     

    
      	
              15.2  

            	
              Representations of
      Executive.  Executive represents that his performance of
      all the terms of this Employment Agreement and his performance as an
      employee of the Company does not and will not breach any agreement to keep
      in confidence proprietary information, knowledge or data acquired by
      Executive prior to his employment with the Company.  Executive
      will not disclose to the Company, or induce the Company to use, any
      confidential or proprietary information or material belonging to any
      previous employer of Executive or others.  Executive is not a
      party to any other agreement or understanding that would interfere with
      his full compliance with this Executive Agreement.  Executive
      agrees not to enter into any agreement, whether written or oral, in
      conflict with the provisions of this
Agreement.

            


    

     

    
      	
              15.3  

            	
              Extension of
      Restrictions.  The period of all restrictions under this
      Agreement will automatically be extended by a period equal in length to
      any period in which Executive violates his obligations under this
      Agreement.

            


    

     

    
      	
              15.4  

            	
              Enforcement.  In
      addition to any other relief or remedies afforded by law or in equity, if
      Executive breaches Sections 13 or 14 of this Agreement, Executive agrees
      that the Company shall be entitled, as a matter of right, to injunctive
      relief in any court of competent jurisdiction.  Executive
      recognizes and hereby admits that irreparable damage will result to the
      Company if he violates or threatens to violate the terms of Section 13 or
      14 of this Agreement.  This Section 15.4 shall not preclude the
      granting of any other appropriate relief including, without limitation,
      money damages against Executive for breach of Section 13 or 14 of this
      Agreement.

            


    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    
      	
              16.  

            	
              Return of Property:
      Exit Interview.

            


    

     

    
      	
              16.1  

            	
              Return of
      Property.  Upon any termination of his employment with
      the Company, Executive agrees to promptly return to the Company: (A) all
      materials of any kind in Executive’s possession (or under Executive’s
      control) incorporating Confidential Information or otherwise relating to
      the Company’s business (including but not limited to all such materials
      and/or information stored on any computer or other storage device owned or
      used by Executive); and (B) all Company property in Executive’s
      possession, including (but not limited to) computers, cellular telephones,
      pagers, credit cards, keys, records, files, manuals, books, forms,
      documents, letters, memoranda, data, tables, photographs, video tapes,
      audio tapes, computer disks and other computer storage media, all
      materials that include trade secrets, and all copies, summaries or notes
      of any of the foregoing.

            


    

     

    
      	
              16.2  

            	
              Exit
      Interview.  Upon any termination of his employment with
      the Company and upon request, Executive agrees to participate in an exit
      interview conducted by designated personnel and to provide a signed
      statement that all Company materials and property have been returned to
      the Company.

            


    

     

    
      	
              17.  

            	
              Assignment.

            


    

     

    This
Agreement sets forth personal obligations of Executive, which may not be
transferred, delegated or assigned by Executive.  The Company may
assign this Agreement to any successor or affiliate.

     

    
      	
              18.  

            	
              Non-Disparagement.

            


    

     

    During
any period of time during which this Agreement is in effect, and for not less
than twelve (12) months thereafter, Executive agrees not to engage in any form
of conduct or make any statements or representations that disparage,
characterize in demeaning manner or question the Company’s business practices,
products, advice, quality of employees and staff, or otherwise harm the public
reputation or good will of the Company, its employees, or
management.

     

    
      	
              19.  

            	
              Indemnity; Cooperation
      in Legal Actions.

            


    

     

    
      	
              19.1  

            	
              Indemnity.  The
      Company will indemnify Executive against any claims arising from or
      related to his good faith performance of his duties and obligations
      hereunder to the fullest extent allowed by Company By-laws and the
      Minnesota Business Corporation Act.

            


    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    
      	
              19.2  

            	
              Cooperation in Legal
      Actions.  In connection with any action or proceeding
      against Executive, whether pending or threatened, for which the Company is
      obliged to indemnify Executive, the Company will pay or reimburse
      Executive in advance of the final disposition for reasonable expenses,
      including reasonable attorneys’ fees, necessarily incurred by
      Executive.  Executive will cooperate fully with the Company, at
      no expense to Executive, in the defense of any action, suit, claim, or
      proceeding commenced or threatened against the Company in conjunction with
      any action, suit, claim or proceeding commenced or threatened against
      him.  In addition to the foregoing, Executive further agrees to
      provide assistance to the Company, at the Company’s expense, as may be
      reasonably requested by the Company or its attorneys in connection with
      the litigation of any action, suit, claim, or proceeding involving the
      Company, whether not pending or to be commenced, which arises out of or is
      related to any matters in which Executive was involved or for which he was
      responsible during the term of his employment with the
      Company.

            


    

     

    
      	
              20.  

            	
              Survival.

            


    

     

    The
rights and obligations set forth in Sections 6.4, 6.5, 7.1, 8-11, 12.1, 13-19
and 24 shall survive the termination or expiration of this
Agreement.  Such provisions of this Agreement shall survive
termination of Executive’s employment regardless of whether Executive resigns or
is involuntarily discharged.

     

    
      	
              21.  

            	
              Miscellaneous.

            


    

     

    
      	
              21.1  

            	
              Headings;
      Construction.  The headings of Sections and paragraphs
      herein are included solely for convenience of reference and shall not
      control the meaning or interpretation of any of the provisions of this
      Agreement.  This Agreement shall be construed without regard to
      any presumption or other rule requiring construction hereof against the
      party causing this Agreement to be
drafted.

            


    

     

    
      	
              21.2  

            	
              Benefit.  Subject
      to Section 17, nothing in this Agreement, expressed or implied, is
      intended to confer on any person other than the parties hereto, any
      rights, remedies, obligations or liabilities under or by reason of this
      Agreement.

            


    

     

    
      	
              21.3  

            	
              Waiver.  Any
      delay by either party in asserting a right under this Agreement or any
      failure by either party to assert a right under this Agreement will not
      constitute a waiver by the asserting party of any right hereunder, and the
      asserting party may subsequently assert any or all of its rights hereunder
      as if the delay or failure to assert rights had not
    occurred.

            


    

     

    
      	
              21.4  

            	
              Severability.  If
      the final determination of a court of competent jurisdiction declares,
      after the expiration of the time within which judicial review (if
      permitted) of such determination may be perfected, that any term of
      provision hereof is invalid or unenforceable, (a) the remaining terms and
      provisions hereof shall be unimpaired, and (b) the invalid or
      unenforceable term or provision shall be deemed replaced by a term or
      provision that is valid and enforceable and that comes closest to
      expressing the intention of the invalid or unenforceable term or
      provision.

            


    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    
      	
              22.  

            	
              Entire Agreement:
      Amendment.

            


    

     

    
      	
              22.1  

            	
              Entire
      Agreement.  Both Executive and the Company agree that
      this Agreement, Exhibit A to this Agreement and any contemporaneous stock
      option agreement between the Company and Executive, constitute the entire
      agreement between them with respect to the subject matter
      thereof.  There were no inducements or representations leading
      to the execution of this Agreement except as stated in this
      Agreement.  Accordingly, this Agreement (together with Exhibit A
      to this Agreement and any contemporaneous stock option agreement between
      the Company and Executive) expressly supersedes any and all prior oral and
      written agreements, representations and promises between the parties
      relating to Executive’s employment with the
  Company.

            


    

     

    
      	
              22.2  

            	
              Amendment.  This
      Agreement may be amended or modified only with the written consent of both
      Executive and the Company.  No oral waiver, amendment or
      modification will be effective under any circumstances
      whatsoever.

            


    

     

    
      	
              23.  

            	
              Notices.

            


    

     

    Any
notice hereunder by either party to the other shall be given in writing by
personal delivery or certified mail, return receipt requested.  If
addressed to Executive, the notice shall be delivered or mailed to Executive at
the address most recently communicated in writing by Executive to the Company,
or if addressed to the company, the notice shall be delivered or mailed to the
Company at its executive offices to the attention of the CEO of the
Company.  A notice shall be deemed given, if by personal delivery, on
the date of such delivery or, if by certified mail, on the date shown on the
applicable return receipt.

     

    
      	
              24.  

            	
              Governing Law;
      Disputes; Arbitration of Termination of Employment for
      Cause.

            


    

     

    
      	
              24.1  

            	
              Governing Law;
      Disputes.  The Company is headquartered in Minneapolis,
      Minnesota and the parties expect that many of Executive’s contacts with
      the Company will occur through or in connection with its Minneapolis
      office.  Therefore, the parties agree that this Agreement shall be
      governed by, and construed and interpreted in accordance with, the laws of
      the State of Minnesota, as such laws are applied to agreements entered
      into and to be performed entirely within Minnesota between Minnesota
      residents, without reference to principles of conflicts or choice of law
      under which the law of any other jurisdiction would
      apply.  Except as set forth in Section 24.2 below, the
      undersigned each irrevocably consent to the jurisdiction of the United
      States District Court for the District of Minnesota and the courts of the
      State of Minnesota in any suit, action or proceeding brought under, based
      on or related to or in connection with this Agreement, and each of the
      undersigned agrees that either of the aforesaid courts will be the
      exclusive original forum for any such
action.

            


    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    
      	
              24.2  

            	
              Arbitration of
      Termination of Employment for Cause.  Any dispute arising
      out of or relating to termination of Executive’s employment for Cause
      pursuant to Section 6 of this Agreement, shall be discussed between the
      disputing parties in a good faith effort to arrive at a mutual settlement
      of any such controversy.  If, notwithstanding, such dispute
      cannot be resolved, such dispute shall be settled by binding
      arbitration.  Judgment upon the award rendered by the arbitrator
      may be entered in any court having jurisdiction thereof.  The
      arbitrator shall be a retired state or federal judge or an attorney who
      has practiced business law or business litigation for at least 10
      years.  If the parties cannot agree on an arbitrator within 20
      days, any party may request that the chief judge of the District Court for
      Hennepin County, Minnesota, select an arbitrator.  Arbitration
      will be conducted pursuant to the provisions of this Agreement, and the
      commercial arbitration rules of the American Arbitration Association,
      unless such rules are inconsistent with the provisions of this
      Agreement.  Limited civil discovery shall be permitted for the
      production of documents and taking of depositions.  Unresolved
      discovery disputes may be brought to the attention of the arbitrator who
      may dispose of such dispute.  The arbitrator shall have the
      authority to award any remedy or relief that a court of this state could
      order or grant; provided, however, that punitive or exemplary damages
      shall not be awarded.  The Company shall pay the fees and
      expenses of the arbitrator.  Unless otherwise agreed by the
      parties, the exclusive location of any arbitration proceedings shall be
      Hennepin County, Minnesota.

            


    

     

    
      	
              24.3  

            	
              The
      following exhibits are hereby incorporated by reference and each is an
      integral part of this Agreement:

            


    

     

    
      	
              Exhibit
      A

            	
              Change
      of Control Agreement

            
	
              Exhibit
      B

            	
              Annual
      Management Incentive Plan (AMIP)

            
	
              Exhibit
      C-1

            	
              Incentive
      Stock Option Agreement, 2004 Equity Incentive Plan

            
	
              Exhibit
      C-2

            	
              Incentive
      Stock Option Agreement, 1999 Stock Option
Plan

            


    

    


     

    IN WITNESS WHEREOF, the
parties have executed this Agreement by their signatures below, to become
effective on the Commencement Date noted above:

     

    
      	
              Analysts
      International Corporation

            	
              Michael W. Souders (“Executive”)

            
	
              By:______________________________

              Title:____________________________

            	
              By:______________________________

              Date
      signed:______________________

            
	
              Date
      signed:______________________

            	 
      


    

     

    
      15